Posts Tagged ‘labour’

So the NZ Labour Party is proposing to cut immigration to help reduce the rapidly rising cost of housing. There has been a lot of confusion about how this is intended to be done – whether to cut temporary visas or residence visas for example.

Labour leader David Cunliffe is now stepping away from the more contentious comments, indicating the whole thing has been a media beat up. While to some degree this may be true I clearly remember Mr Cunliffe stating there is “open slather” on the current immigration system. So is there “open slather”?

Ignoring historyThe party appears to have settled on visas being issued through the Skilled Migrant Category as the problem – people on temporary work visas generally don’t buy houses – but this ignores history.

Skilled Migrant is the largest residence stream and is managed through a points system. The Labour Party have most recently indicated they would use this points system to manage numbers on the basis that reducing numbers would reduce pressure on house prices.

I say this ignores history as over the past five years the Skilled Migrant Category has been slashed by a third. This reduction has had no apparent effect in lowering house prices.

Here is a graph of residence visas granted since 2008/09:

Source: Immigration New Zealand Residence programme statistics
As 2013/14 figures are only available to 4 May (307 days of the year) I have calculated a figure based on this for 365 days.

To explain the categories:

Skilled Migrant – skilled workers meeting a stringent points system.

Other business/skilled – investors, entrepreneurs etc.

Humanitarian – refugee quota, pacific quotas.

Capped family – family members of migrants (only parents can use this now).

Uncapped family – foreign-born partners and children of NZ citizens and residents.

Changes since 2008/09Clearly the Skilled Migrant stream is by far the largest single stream and this is because the residence programme is designed to fill skill gaps.

While most of the streams have changed very little, numbers coming through the Skilled Migrant stream are down by 32%. Over the past five years nearly 32,000 less people have gained residence visas through this category compared to 2008/09 levels.

Manipulating the points system

So why have these numbers fallen so far? Because government has been managing numbers using the Skilled Migrant category points system – the same tool Labour proposes to use to reduce house prices now.

Government has incrementally been raising the bar on the Skilled Migrant points system since January 2010 by reducing the types of applications accepted – at the first stage called Expressions of Interest or EOIs.

For example before January 2010 any EOI scoring 100 points or more stood a very good chance of being selected to begin the process. Since January 2010 – across 112 selections – only EOIs with bonus points relating to skills in long term shortage have been selected.

Additional changes in June 2011 and January 2013 further reduced this to the point where the only EOIs being routinely selected now are those with 140 points or a skilled job offer. All of the data is provided by the immigration department and available for analysis.

The natural result of less people entering the system has been less visas being granted: using the points system to manage numbers.

Source: Immigration New ZealandAgain as 2013/14 is incomplete I have used the average for this year for the last 3 selections to go to complete a total year figure.

I am not aware of a resulting drop in the cost of housing in New Zealand.

I am aware however of a huge increase in skill shortages with 59% of employers reported as struggling to find key staff. Skill shortages directly reduce the number of jobs and training opportunities for New Zealanders while lowering wage growth and company profits – arguably one of the reasons the NZ economy has failed to pick up.

The original quotas were set at a level in 2002 for a reason and had been working very well. Since these changes were implemented government has missed minimum quota levels by an average of over 4,600 per year (10%).

Summary
Labour’s proposal then is for more of the same to produce a different result.

Wasn’t it Albert Einstein who defined insanity as “doing the same thing over and over again and expecting different results”?

The Labour Party, in the lead up to this years’ election, is proposing to cut immigration to help reduce the rapidly rising cost of housing as covered in the Press today and echoed by Phil Twyford on The Nation this morning.

“Labour’s proposal would, in part, see the “points system” under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.”source

So what’s wrong with this policy?

Well there are quite a few problems, but the main one is that doesn’t work.

A few issues
Some of the main issues with this have been identified in todays’ article, for example that the Permanent and Long Term Migration figures being used cover everyone coming in for a year or more (working holidaymakers, students, temporary workers and residents), the vast majority of which would have no intention of buying a house here.

When Labour talks about the “points system” what they mean is a system used in assessing applications under the Skilled Migrant Category (SMC) of New Zealand’s Residence Programme. Points are awarded for age, work experience, qualifications with weighting towards having skilled employment here, especially if this is in an area of long term skill shortage.

There are a number of problems with using the SMC to manage immigration like this such as:

Time lag
It takes on average between 8 and 12 months for an application to go through this process, longer if the person is offshore. Any changes will take a very long time to have an effect.

Numbers
If Labour is planning to use this immigration route to manage immigration by 25,000 to 35,000 there is a problem – only 18,156 visas were granted through this stream last year. A cut could easily see the entire stream canned.

While some people might think that would be a good idea, remember that NZ is in an international battle for skills, trying to attract top migrants here to fill skill gaps. We’re not talking about gaps which can be met by training a few I.T. graduates as the article suggests, we’re talking about attracting qualified professionals who already have years of experience.

I was talking to a Christchurch employer recently who confirmed for every highly skilled foreign worker (usually with 10+ years of experience) they employed they could employ and train at least 2 New Zealanders.

Incentive
So under this policy SMC points will move around in an unpredictable way. Is it an incentive for migrants to have to pay $2,320 to enter a system where the goal posts are continually moving? We need more transparency in immigration, not less.

Ignoring history
Finally there is one major problem with this policy – it doesn’t work. We know it doesn’t work because it hasn’t.

Successive changes were made by government in January 2010, June 2011 and January 2013 to make the SMC points system harder to get through, as a result visas granted have dropped by 32.78% compared to 2008/09. The effect of this has been nearly 32,000 less people allowed residence visas under SMC during the past five years.

What effect has this had on Auckland house prices? Why would further cuts have a different effect?

Interestingly during the same period (25 July 2011) “residential property development” was added by the government to the list of acceptable investment types for wealthy overseas investors to apply for visas here. Just sayin’.

Cutting immigration has become a key election issue on both sides of the political spectrum.

Labour leader David Cunliffe has recently been reported on the NBR website indicating Labour would slash the net migration flow from 40,000 — which he claims is overheating the property market — to between 5000 and 15,000.

So what would this mean?

Net migration
There are different measures of migration and Mr Cunliffe would be talking about Permanent and Long Term migration, or the New Zealand Residence Programme as both average just under 40,000. As we’re talking about the housing market it would make sense to look at how this would impact on residence visas issued.

On average just under 40,000 people come to live in New Zealand permanently every year. These are made up of four main streams – using 2012/13 figures roughly these are:

51% – skilled workers, entrepreneurs and investors

29% – the foreign-born children and partners of New Zealand citizens and residents

11% – the parents of migrants

8% – humanitarian and pacific quotas

So if immigration was cut, who would still get through? Are we just talking about foreign workers? The following is a view of the idea of these cuts using actual immigration figures from 2012/13:

5,000 places
I guess the individuals getting first option would be those NZ legally has to take under agreements and treaties – around 2,200 people.

Second option would presumably go to the children of NZ citizens and residents – around 1,200 places.

There would sadly only be just under 1,500 places for the foreign-born partners of kiwis with 85% (around 8,500) losing out.

This would leave no spaces for skilled workers or investors. I am guessing parents of migrants and other humanitarian cases we are not legally required to take would be at the back of the queue, no space for them either.

15,000 places
Expanding the number of places to 15,000 would enable all of the children and partners of NZ citizens and residents to get through – phew!

There would be space for around 883 skilled workers and their families (assuming the current rate of 1.65 people per application continues). Parents and other humanitarian cases would presumably lose out.

The effect of this change
I won’t go into how this policy might affect NZ, I’ll leave that to your discussion, but I’ll pose some questions:

Will it be an incentive for kiwis to return to NZ if their families are not allowed to come too?

Certainly food for thought. The migrant quota has been in place for many years (i.e. under Labour and National governments) providing benefit to NZ quietly year by year with balanced and controlled migration.